South Africa's financial sector ten years on: performance since democracy

Abstract

The South African financial sector, defined as the banking, insurance and securities industries, has contributed to the growth of the economy since democracy in terms of growth in assets and value added, although its provision of financial services to the poor has been less impressive. The article takes a broad approach to evaluating the performance of the sector in terms of the balance between stability and innovation, and the balance between efficiency and allocation of resources. While the financial system has proved to be stable, innovation has generally been for the high‐value, contested market. In terms of cost efficiencies and provision of services to small businesses and poorer consumers, there is room for improvement. The performance of the sector is linked to the regulatory regime, and the extent to which the sector will be able to improve its allocative performance will be influenced by mooted regulatory changes.

1 ECONOMIC OVERVIEW OF THE SECTOR

As is the case with other service sectors such as transport and telecommunications, the importance of a well‐functioning and well‐developed financial sector is apparent often only when the sector is disrupted or fails. This begs the question of how to evaluate the performance or functionality of the financial sector when it is not in crisis (see, for example, Rajan & Zingales, 2000). One way would be in terms of efficiency – which could be measured by intermediation costs between saver and investor. However, such a narrow evaluation of the performance of the financial sector inadequately describes its importance. While financial systems perform as intermediaries between saving and investment, where efficiencies are important, they also enable saving through finance and allocate saving through funding. In this broader view of the functionality or performance of the financial system, the financial sector can be evaluated both in terms of its stability at the macroeconomic level and in terms of the allocation of real resources at the microeconomic level (Studart, 1995: 65).

In the macro‐sense, the functionality of the financial system is associated with its ability to keep an inherently fragile fractional reserve system reasonably stable. A stable system helps minimise the likelihood of a run on the banks and the associated disruptions to the financial system. Costs of banking crises expressed as a percentage of GDP can easily be more than 10 per cent (Borio, 2003). As the failure of the fragile system is associated with both economic demise and undermined confidence in the monetary system, much regulatory effort has gone into ensuring macroeconomic stability. However, while stability is important, a financial system also needs to allow for innovation and change. A financial system with, for example, only four large banks may be considered stable, but may be socially costly in terms of their ability to capture profits. Moreover, the complacency of such a structure may prohibit new developments. Hence the successful macroeconomic performance of a financial system implies striking a balance between stabilising a fragile system and allowing for new development.

In the microeconomic sense, the functionality of the system is associated with the allocation of real resources, with a view to facilitating economic activity. Two banking systems may have the same intermediation costs, but if the one is able to provide loans to more successful projects than the other, this makes it more functional. It is the ability of banks to influence the rate of investment through financial provision that gives them a key role in the economy (Keynes, 1971: 327). The concept of influence on economic activity can also be extended to financial provision for households. In this sense, the successful microeconomic performance of the financial system involves striking a balance between the cost of financial services and the ability to allocate these resources in a socially desirable way.

The analysis that follows turns on the notion of functionality in terms of macroeconomic stability and influence on microeconomic activity. As these concepts are more complex than, for instance, the intermediation price between saver and investor, a number of indicators will be used to form a picture of the functionality of the sector.

In Section 2 the competitive and regulatory environment in the banking, insurance and securities industries is examined. This will provide insight into changes in the competitive structure and regulatory approach over the past decade. In Section 3, the macroeconomic performance of the sector is evaluated. In Section 4, the influence of the financial sector on economic activity and its provision of services to all South Africans are evaluated. Section 5 evaluates the performance of the sector, and Section 6 concludes. Space constraints have meant that the analysis of future factors affecting performance have had to be omitted.

1.1 Contribution of the sector

The contribution of the financial sector to the South African gross domestic product (GDP) has grown steadily over the past decade. The data in Figure 1 show that the financial sector contributes around 20 per cent to economic activity measured in terms of GDP. The contribution of the sector appears to have levelled off over recent years within the 19–20 per cent range. The data in the figure are for the entire financial sector, including real estate and business services. The banking industry contributes an estimated 35 per cent of the value added of the financial sector, as calculated using the gross values of net interest income and non‐interest income (Wallis Report, 1997). The insurance industry contributes around 16 per cent, based on the Financial Services Board's (FSB) estimates of the insurance industry's contribution to GDP.

Contribution of the financial sector to GDP

Note: Includes financial intermediation, insurance, real estate and business services.

The significance of the financial sector can also be examined in terms of the size of the sector's assets. In Table 1 it can be seen that the size of the banking industry's assets has increased steadily as a percentage of GDP. By 2001, the value of banks' assets exceeded GDP for the first time. It could be argued that the size of these assets relative to GDP underlines the importance and potential influence of the banking sector to the South African economy. Of course, this is merely a rule of thumb, but it is commonly used in analysis of this sort.

Assets and loans as a percentage of GDP

Banking industry
	Value of assets (R bn)	Assets as a % of GDP	Value of loans and advances (R bn)	Loans and advances as a % of GDP
1993	294,6	69,1%	233,3	54,8%
1994	344,2	71,4%	270,8	56,2%
1995	399,1	72,8%	315,3	57,5%
1996	472,1	76,4%	373,0	60,4%
1997	550,5	80,3%	440,4	64,2%
1998	654,8	88,6%	510,7	69,1%
1999	728,0	90,9%	554,7	69,3%
2000	819,0	92,2%	612,6	69,0%
2001	1 049,9	106,8%	732,8	74,6%
2002	1 100,7	100,2%	800,2	72,8%
Source: Bank Supervision (various years).

Banks' assets are predominantly loans and advances to the private non‐bank and government sectors. While the ratio of loans and advances to assets has been on a declining trend over the past decade (from 79 per cent of assets in 1993 to 72 per cent in 2002), the increase in the sector's growth has meant that loans and advances have grown from around 55 to 73 per cent of GDP. In Brazil, where loans are a scant 25 per cent of GDP, banks are seen as inhibiting economic growth (Economist, 2003). This is clearly not the case in South Africa.

As the insurance industry cannot create assets by offering loans and advances in the same way that banks can, it seems to be more appropriate to compare the ratio of assets less liabilities to GDP for the insurance industry. The liabilities of the long‐term insurance sector have outgrown assets in recent years, so that the industry's assets less liabilities now make up just over 8 per cent of GDP, relative to 14,9 per cent in 1999 (Table 2). The cumulative assets of the short‐term insurers are small relative to those of the long‐term insurers.

Assets and liabilities of the insurance sector as a percentage of GDP

	Long‐term insurance			Short‐term insurance
	Value of assets (R bn)	Assets less liabilities (R bn)	Assets – liabilities as a % of GDP	Value of assets (R bn)	Assets less liabilities (R bn)	Assets – liabilities as a % of GDP
1994	317,3	57,7	12,0%	22,4	14,1	2,9%
1995	369,7	64,7	11,8%	26,7	17,1	3,1%
1996	443,2	88,4	14,3%	31,9	20,5	3,3%
1997	498,0	95,8	14,0%			0,0%
1998	515,8	83,1	11,2%	35,62	20,38	2,8%
1999	645,1	119,4	14,9%	39,12	19,34	2,4%
2000	709,4	108,1	12,2%	37,73	19,79	2,2%
2001	744,4	80,4	8,2%	34,54	16,2	1,6%
Source: FSB (various years).

A proxy for assessing the relative importance of the securities market is the market capitalisation of the securities exchange. Market capitalisation refers to the sum of the values of the shares of all listed companies, expressed here as a ratio to GDP. The market capitalisation peaked in 1999, at over twice the value of the economy's GDP (Table 3). By this measure, the JSE Securities Exchange SA far is bigger than the exchanges of some higher‐income countries such as Australia and Spain. At a market capitalisation of R1.5 trillion, the JSE Securities Exchange SA is the world's fourteenth biggest exchange (Business Day, 2003a).

Market capitalisation and GDP

Year	Market capitalisation (R bn)	GDP (R bn)	Market capitalisation/GDP
1993	801	426,1	188,0%
1994	921	482,1	191,0%
1995	1023,4	548,1	186,7%
1996	1130	617,9	182,9%
1997	1129,4	685,7	164,7%
1998	1001,6	738,9	135,6%
1999	1616,2	800,6	201,9%
2000	1551,5	888,1	174,7%
2001	1770,7	982,9	180,2%
2002	1584,2	1098,7	144,2%

The financial sector has made a steady contribution to the economy over the past decade. The importance of the sector – as measured by value added, size of loans and assets and market capitalisation – has grown.

1.2 Market dynamics

The South African financial sector has undergone substantial structural change over the past ten years. This is evidenced by the change in the number and range of players, the change in product offerings and the change in institutional and regulatory arrangements. These changes have different causal forces, not least of which are democratisation and the associated liberalisation of the South African economy since 1994.

Democratisation has brought to light the lack of financial provision to the majority of South Africans. This has stimulated new forays by the financial players into new areas, not all of which have been successful. The demand for a financial sector that functions for all South Africans has not yet been satisfied, as is evident in the current negotiations around the Financial Charter.

The opening of the South African market to financial flows and the liberalisation of its economy followed the advent of democracy and heightening international awareness of the country as an investment destination. The impact of the period of liberalisation followed by a period of consolidation of the banking and securities industries is revealed in part by an examination of the number of fully registered local banks (excluding mutual banks and local branches of foreign banks) and the number of listed companies in Figure 2.

Number of registered banks and listed companies

The number of banks increased more or less constantly until 2000. In 2001 it fell slightly and in 2002 dropped sharply by 28 per cent from the previous year. The decline in numbers since 2000 is a consequence of the demise of a number of the A2 banks, i.e. the smaller South African banks. (These are essentially all local banks except the Big Four – ABSA, Standard Bank, Nedbank and First National Bank – and Investec). Some A2 banks were acquired by larger banks as part of the consolidation in the industry, including Imperial Bank, Mercantile Lisbon and McCarthy Bank. Others dissolved for reasons of poor financial management, such as Regal Treasury Bank and Saambou. Others, such as African Merchant Bank, Brait Merchant Bank, Cadiz Investment Bank and Corpcapital Bank, did not apply for renewal of their licences in 2002. The banks in the latter group surrendered their licences, as the benefits of retaining a bank licence no longer appeared to outweigh the costs.

Between 1994 and 1997, there was little change in the number of listed companies on the JSE Securities Exchange SA, which stood at around 640. In 1998, the number increased sharply to 668, where it remained in 1999, the year in which the market peaked. The progressive fall‐off in the number of companies thereafter to 472 was associated with a global bear market and investors moving to assets more stable than equities. Listed companies whose shares trade below their intrinsic value have little incentive to stay listed, unless they have future capital requirements. Since 1999, there has been a 29 per cent drop in company listings.

The impact of expansion and then consolidation on the competitive structure and regulatory environment in all three financial industries is further examined in Section 2.

2 THE COMPETITIVE AND REGULATORY ENVIRONMENT

The decade since democracy has been one of structural and regulatory change. During this period, there has been increasing competition from niche players and foreign entrants, as technology and financial liberalisation created the stimulus for competition from new areas. In addition, the sector has been subject to changes regarding new regulation, compliance and transparency. The process of democratisation has also required the banks, insurance firms and securities markets to examine the extension of services to the great number of South Africans excluded from formal financial provision. Regulation has changed frequently, often in response to some of the above trends. In addition, the competitive environment has been fluid. The following sections explore these aspects more fully.

2.1 The competitive environment

The competitive environment will be discussed in terms of the changes in market structure, the market share of the major players, and their associated concentration indices. The focus will be on the banking and insurance industries because of the paucity of comparative data on the securities brokers.

2.1.1 Market structure

2.1.1.1 Banking industry

Over the past decade and until the last two years, a growing number of players have entered the banking industry. However, it remains a concentrated industry with a few players dominating, particularly in the provision of services in the retail market. The top four banks still account for around 70 per cent of the industry's assets, although this understates their dominance in terms of certain market segments.

The change in market share is shown in Table 4. In 1994, the four major banks plus Investec made up 87 per cent of the market, but by 2001 this had slipped to just over 75 per cent. The loss of market share by the top four players and the related increase in share won by smaller niche and foreign banks since 1994 has meant that together, foreign and other banks now make up close to a quarter of the share of banking assets in South Africa. This shift towards the niche players has occurred mainly in the corporate and high‐net worth individual market segments, with none of the foreign or niche banks targeting the mass retail market clientele. Until recently, foreign banks were restricted to the upper income end of the scale, as they were prohibited from opening accounts with natural persons with deposits less than R1 million.

Market share of assets of major players in the banking industry

Expressed as % of total assets	1994	1998	2001	% change 1994–2001
ABSA	29	23	19,3	−33,4%
Stanbic	21	19,5	17,6	−16,2%
First National Bank	19	14,4	18,7	−1,6%
Nedcor	15	15,7	13,8	−8,0%
Other (including BOE)	12	18,1	16,9	40,8%
Investec	3	5,1	6	100,0%
Foreign	1	4,2	7,7	670,0%
TOP 4	84	72,6	69,4	−17,4%
TOP 5 (plus Investec)	87	77,7	75,4	−13,3%
Share of others and foreign	13	22,3	24,6	89,2%
Total share	100	100	100

Based on the SARB's DI 900 returns for deposit‐taking institutions (Banking Supervision, n.d.), the share of the top four banks' loans in the corporate market segment amounts to 68,5 per cent, with Investec and other banks making up the rest. In the retail market, the four major banks have retained their market share. At the end of 2002, for example, it was estimated that the top four banks now account for 85 per cent of instalment sales credit within the banking industry, and over 92 per cent of mortgages. In June 2003, 83 per cent of total deposits by the public were in the vaults of these four banks (Mboweni, 2003).

Figure 3 shows the number of banks that make up two‐thirds of the industry for a number of emerging markets. The comparison shows that high levels of concentration are not unique to South Africa, and that the domination of the South African industry by only four banks is in keeping with other middle‐income emerging markets.

Banking sector concentration

2.1.1.2 Insurance industry

Data regarding the market share in the insurance industry vary for the long‐ and short‐term industries (Table 5). In the long‐term insurance industry, there are four companies with 10 per cent of the market share of assets. At the end of 2001, the latest year for which there are data, Old Mutual, Sanlam, Momentum and Liberty Group made up 35, 22, 11 and 10 per cent of the long‐term industry assets, respectively. The fifth largest firm is Investment Solutions, with a 4,3 per cent share (FSB, 2002). While the share of the dominant three players has declined by some 9 per cent since 1995, the shares of the top five have remained relatively stable. By contrast, in the short‐term market, there were two large players at the end of 2001 – Mutual and Federal and Santam, together making up 32 per cent of the market share of assets. The other large firms are Hollard and Guardian National, as well as SASRIA.

Market share in the insurance industry, selected years

Market share of assets	1995	1996	1999	2001
Long‐term (life) insurance
Big three firms	77,6%	76,3%	71,4%	68,3%
Big five firms	88,2%	87,5%	82,1%	83,3%
Short‐term insurance
Big three firms	66,3%	66,7%	46,8%	37,8%
Big five firms	75,1%	74,0%	54,6%	47,1%
Notes: Big three firms = Old Mutual, Sanlam, Momentum Group. Big five firms = Old Mutual, Sanlam, Momentum Group, Liberty Group, Investment Solutions. Source: FSB (various years).

The market share of assets of the top five firms in the long‐term insurance industry has been a relatively stable one over the past decade. However, this is not true of the short‐term industry where the top five firms have lost close to 30 per cent of their market share of assets since 1995. Figure 4 plots the market share of premiums of the top five firms in the long‐term insurance industry, together with the market share of assets and the number of registered long‐term insurance firms. Whereas the top five accounted for over 86 per cent of the share of long‐term insurance premiums in 1995, this had decreased to 65 per cent by 2001. Over the same period, the number of registered firms increased from 39 to 67. This suggests that new entrants have begun to erode the premium income share of the biggest insurance firms.

Long‐term insurance industry: market share and number of firms

In the short‐term industry, the new entrants affected the market share of premiums of the top five companies less noticeably, with the share of premiums in 1995 around 49 and 46 per cent in 2001.

2.1.1.3 Local brokerage firms

Industry sources suggest that the largest local brokerage firms in the South African securities markets are BJM Securities, Investec Securities, and Standard Equity. The largest international brokerages are Merrill Lynch (SA), Deutsche, USB Warburg Securities and JP Morgan. No league tables are published currently, although this may change in future. The sector has waxed and waned in response to liberalisation, changes in the operations of the exchanges and perceived market opportunities.

Prior to 1995, the JSE Securities Exchange SA (then the Johannesburg Stock Exchange) was run by a committee and corporate membership was not permitted. The expansion of the JSE rules in 1995 to permit corporate membership brought with it foreign ownership (e.g. some of the premier broking firms were bought out by foreign banks), increased equity to the securities firms and increased liquidity on the exchange. South African stockbrokers announced deals with international counterparts, such as David Borkum Hare with Merril Lynch, Martin & Co with Robert Flemming and Ivor Jones, Roy & Co with Deutsche Morgan Grenfell. Barings‐Ing and other international players applied for membership of the JSE. The change in structure and ownership was associated with new skills and improved quality of research in the securities industry (Rebe, 2003). While initially this period of consolidation meant that the number of registered stockbrokers (47) did not increase, in 1996 the number of stockbroking firms grew to 54. By 2002, there were 63 firms. Coinciding with the influx of foreign interest was an improvement in regulatory standards and compliance on the exchange. The entry of international players can be attributed to the opening of the South African market, which was growing in importance in emerging market portfolios. The perceived business associated with privatisation was also an important drawcard. By the end of 1999, the strength of these pull factors had waned and in the light of a global bear market and the need to re‐evaluate global placement of resources, some of the international players began to withdraw or downgrade their presence.

Figure 5 shows the steady increase each year in the value of shares traded (in dollar terms) on the JSE Securities Exchange SA, as well as the rise in the share index values. Following the liberalisation of the JSE rules in terms of corporate membership, the value of shares traded grew by around 60 per cent in 1996 and 1997, after which growth tapered off somewhat, although the overall trend is still positive. The opening up of the securities market increased the liquidity or ‘thickness’ of the market. Once the electronic settlement and clearing system (JET) was set in place, the number of daily trades increased from 2 500 to 17 000 (Burke, 2003).

Value of shares traded and index of the JSE Securities Exchange SA

2.1.2 Concentration indices

Several indices may be used to measure competition and concentration in a sector. The most widely used index in the literature is the Herfindahl–Hirschman Index (HHI). The HHI accounts for both the number and relative size of players in the system and is therefore preferred to other measures of concentration. It is most commonly calculated by summing the squares of the market shares (Stiglitz, 1993). For example, if the industry consists of a monopolist, then the HHI = (100)² = 10 000, or if it is a contested market with 100 firms, each with a 1 per cent market share, then the HHI = (1)² × 100 = 100.

The South African Bank Supervision department publishes the HHI for the registered banks, calculating it in the conventional way and then dividing by 10 000. Concentration levels become a concern when the index reaches a level of 0,18. The HHI declined steadily from 0,170 in 1995 to 0,136 in 1998, both as a consequence of greater foreign participation in the local banking industry and the entry of niche players (Figure 6). From 1998 to 2001, the HHI remained stable before deteriorating in 2002. When the Nedcor–BOE merger is taken into account, the HHI deteriorated to 0,175 in 2002, which represents pre‐1995 levels and an increase of 33,4 per cent from 2001 to 2002. This level is only slightly below the concentration threshold. However, it may well be more appropriate to evaluate levels of concentration by submarket rather than by firm. As is suggested by some of the market share ratios discussed above, when evaluated by product, higher levels of concentration are evident than when firm analysis is applied.

The HHI for the South African banking sector

A rise in the concentration of the banking system (as seen in the South African market between 2001 and 2002) is associated in the literature with an increase in the market power of banks. Hence, a higher concentration in the banking environment is associated with higher margins between lending and deposit rates and higher levels of profits earned by banks. Most data for European banking systems indicate a positive and significant relationship between concentration and financial margins (Banking Supervision, 1998).

An alternative argument suggests that banks will become more profitable if they are more efficient, and that efficiency will give rise to a larger market share. This suggests that the relationship between market concentration and profitability is not unidirectional. Regulation can also restrict the entry of new banks to a market, enhancing the opportunity available for incumbents to take excessive profits. In general, if a market is contestable, there will be less opportunity for banks to generate excessive profits or to have unduly wide margins (Banking Supervision, 2002). These themes are explored further below.

2.2 The regulatory environment

Regulation of the financial sector, particularly the banking sector, remains a contentious issue. The free banking argument maintains that banks are no different from other firms and hence should not be regulated at all. Benston & Kaufman (1996) argue that regulation is not justified by poor distribution of wealth or lack of competition, but may be justifiable on the basis of the fragility of banks. However, there are also those who argue that the modern monetary system is based on the convention of the general acceptability of money (Dow, 1996). If there is not general confidence in money, the system is undermined. The perspective offered here agrees with the latter view that regulation is justified because banks are vulnerable as a consequence of the fractional reserve system. Unguarded vulnerability can lead to bank runs, spillovers to innocent banks and firms, a credit crunch (where there is reduced availability of credit), impairment of the payments system, and costly uncertainty. Prevention of bank failures can generate welfare benefits (Llewellyn, 2000). However, the difficulty for regulators is to know when to intervene and to what extent. Like the market players that they hope to influence, they do not have perfect insight. If regulation generates stability, an evaluation of the financial sector implies an evaluation of the regulatory system as well.

Over the past decade, there have been a number of identifiable trends in regulatory approaches applied to the sector. While there is some overlap in these trends, they may be categorised as the phases of liberalisation of market access, the adoption of international norms, market conduct and consumer protection, and of corporate governance and money‐laundering prevention norms. A major factor affecting these trends has been the opening of the economy to financial flows and global influences. As a consequence there has been increased pressure for the adoption of international norms. We now briefly examine these phases.

The initial phase, immediately subsequent to the first democratic election, was associated with liberalisation of market access. In the banking, insurance and securities industry alike, foreign entities could now be licensed. In the securities industry, prior to the change of rules governing brokerages in 1995, only South African citizens could register brokerage firms. In 1994, the Banks Act was amended to allow for foreign banks to establish branches. While foreign insurance firms can establish subsidiaries, licensing for branching is not yet permissible.

In line with the greater openness of the sector, a greater commitment to international standards was increasingly apparent, with each of the local regulators affiliated to the relevant international industry body. The international norms do not necessarily represent an improvement – as recent scandals such as the Enron and Anderson cases have reminded us. Nonetheless, integration into the world economy appears to be associated with the adoption of its standards. In the securities industry, the application of international norms resulted in dematerialisation of shares to allow for electronic trading; the adoption of the STRATE (‘Share Transactions Totally Electronic’) system to allow for smoother settlement of trades; and the adoption of the electronic trading system of the London Stock Exchange. International pressure for higher prudential standards arose primarily from the standards associated with the International Monetary Fund's Financial Sector Assessment Programme (FSAP), with its 25 core principles, as well as the Second Basel Accord (Basel II). These standards led to changes in the Banks Act and amended regulations relating to banks in terms of prudential compliance in 2000.

The trend towards adoption of international norms has also led to greater regulatory imposition regarding market conduct and consumer protection, particularly in the banking and insurance industries. Both the Long‐ and Short‐Term Insurance Acts of 1998 and the Financial Advisory and Intermediary Services Act of 2001 have laid down minimum standards in terms of training, accreditation, and disclosure to clients. These standards aim to reduce consumer exploitation.

Over and above these trends has been the concurrent tendency towards corporate governance. This has influenced regulatory requirements in a number of areas: corporate governance in all three industries has been standardised in each of the industries in recent years, involving accounting disclosure and reporting. South African Reserve Bank officials point out that the requirements for banking executives are more onerous than for any other South African company. In addition, the Financial Intelligence Centre Act (FICA) requires compliance from all financial players in terms of greater information on the client base, with a view to reducing the use of the domestic financial system as a money‐laundering mechanism.

These trends suggest that while access to the market has improved, this has been accompanied by an increase in the regulatory burden. Compliance for South African banks involves four prudential sessions a year with the Reserve Bank, a joint meeting with the external auditor and the Reserve Bank, as well as a further meeting with Reserve Bank officials, all of which involve substantial preparation. Small banks, in particular, complain that this entails high costs. These requirements, together with the minimum capital requirement of R250 million, provide a substantial barrier to entry. The absence of more than one licensing mechanism for deposit‐taking institutions remains a barrier to entry, something which the proposed future legislation on second‐ and third‐tier banking will address.

To summarise:

1.	With the advent of democracy and with the liberalisation of the external account and the deregulation of the sector, the entrance of new local and foreign firms has provided a much‐needed competitive stimulus to the three financial industries.
2.	While the new entrants have eroded market share in the banking, insurance and securities industries, there is still a high degree of concentration of assets. This appears to be in keeping with other emerging‐market countries.
3.	The effects of the more recent trends towards consolidation do not appear to have been fully played out, although high levels of concentration in certain market segments remain a concern.
4.	The changes in regulation over the decade have done much to align the South African financial sector with international regulatory norms. This has brought with it a number of increased costs associated with compliance.

3 MACROECONOMIC PERFORMANCE

This section examines the performance of the South African financial sector from a macroeconomic perspective. As suggested in the introduction, good performance at the macroeconomic level requires striking a balance between stabilising a fragile system and allowing for new development. To evaluate the latter, a number of indicators associated with growth and change will be used. This is followed by a discussion of the stability of the sector.

3.1 Growth performance

Between 1993 and 2002, real growth of the South African economy averaged around 2,6 per cent per annum. During the same period, the financial services sector grew nearly twice as fast, at an average of 4,5 per cent per year (Figure 7). The data show that the financial services sector has been relatively buoyant since 1996, outgrowing the rest of the economy each year (apart from 2002) and proving to be a source of growth for the economy overall.

Real annual growth of the financial services sector relative to the economy (GDP)

Since 1997, however, the financial services sector has been shedding jobs, as depicted by the data in Figure 8. Employment in the economy as a whole has been declining annually, for the whole period shown except 2002, when employment grew by 0,1 per cent. Employment grew in the financial services sector in 1994, 1995 and 1996, but has declined each year since then. The top 22 banks have indicated that they cumulatively terminated 9 000 jobs in 2002 (PriceWaterhouseCoopers, 2003), and the closure of some of the smaller banks has also led to employment losses. The absorption of some insurance firms into bigger groups in 2002 also reduced employment in the insurance industry.

Change in employment in the financial services sector relative to the economy

Another indicator of development in the sector is the extent to which it is associated with innovation. A number of possible factors affect innovation, including technology, globalisation and consumer needs. New developments are frequently a consequence of the interplay of these forces. Over the ten years under review, a number of facilities have been introduced or enhanced by the South African banking industry, sometimes earlier than other higher‐income countries. These innovations include:

1.	An increased number of automatic teller machines (ATMs) and expansion of services through ATMs
2.	Telephone banking
3.	Debit cards
4.	Debit order facilities on transmission accounts (led by the E‐plan initiative)
5.	Internet banking
6.	Banking via mobile phones
7.	Smart card banking
8.	Automated credit scoring

While there have been innovations in the sector, it is probably fair to conclude that these have been stimulated by competition at the high end of the market and advances in technology, rather than driven by demand.

3.2 Evaluation of stability

The type of financial instability associated with failure of the banking system brings with it a host of potential costs. Some of these are private costs that accrue to the shareholders, depositors, bank creditors and borrowers of the institution. Others are social costs that spill over to the community. Loss of confidence in the banking system may cause withdrawals that jeopardise previously unaffected banks and firms. Firms and households may be unable to adjust their balance sheets, as they are denied access to deposits and credit facilities. The emergence of a credit crunch as banks become risk averse may cause or exacerbate a downturn in the economic cycle. While the private costs of banking failure may be disastrous to individuals, it is the more general social costs that regulation aims to avoid.

The cost of bailing out a bank after failure may have its own welfare costs. This raises the familiar issue of moral hazard. If banks perceive that they will be bailed out, they may conduct risky business at will. Successful regulation is a demanding task – regulators must let aberrant banks fail, but not so often that there is loss of confidence in the system.

We should not suppose that a regulatory decision to save a bank on the brink of failure is done with perfect information. The nature of the banking process is such that the quality of assets (mostly loans and advances) cannot be guaranteed. The value of such assets depends on other economic outcomes and expectations. It is difficult to assess whether a bank has a problem of liquidity (which could be temporary) or solvency (which could be terminal).

The case for regulation stems from the need for confidence in the monetary system and in its systemic stability. It may be useful to examine the events around the recent Saambou debacle with this in mind. At the time of Saambou's suspected liquidity crisis, Fitch SA, a ratings agency, downgraded six other similarly rated A2 banks. This occurred on a Friday and by the Sunday, the Reserve Bank had persuaded Fitch SA to reconsider its rating. This action by the Reserve Bank is perfectly in keeping with the notion of reducing systemic risk by restoring confidence in the system. By Monday the crisis had been averted. However, confidence was still not fully restored and when Saambou (the seventh biggest bank at the time) was put under curatorship in February 2002, it became evident that loss of confidence in small banks was beginning to affect another bank – in this case BOE, the sixth biggest bank at the time. The regulators intervened once more to restore confidence in BOE, stating that demand for funds would be honoured by the Reserve Bank. Shortly afterwards, the takeover of BOE by Nedcor was approved.

In this case the regulator tolerated the failure of a single bank and attempted to ward off threats to the system as a whole. In attempting to restore confidence to the market through making reassuring pronouncements, the regulator injects knowledge into an uncertain system – essentially attempting to convince depositors not to undermine the system. In the absence of such assurance, depositors may feel compelled to confirm their individual liquidity by withdrawing their funds from the system, which, in turn, increases the likelihood of a systemic crisis.

A commonly used indicator for instability is the number of bank failures. Bank failures disrupt stability from the perspective of individual investors, entrepreneurs and consumers, as well as on a broader social front. However, while some banks are allowed to fail, others are bought out when they face failure. While eight banks were liquidated between 1994 and 2002, significantly more (48) deregistered or were taken over (Table 6). In total, some 56 banks were either liquidated, acquired, taken over or deregistered over the decade under review. While the number of failures is frequently used as an indication of instability, it is a blunt indicator and potentially masks information on those banks that perhaps should have been allowed to fail. While an absence of failures can mean that moral hazard is encouraged, this does not appear to be the case in South Africa. It could be argued that the Saambou and BOE incidents suggest that a ‘too big to fail policy’ exists, which potentially reinstates the moral hazard for large banks.

Bank deregistration and failure

Reasons for deregistration	1994	1995	1996	1997	1998	1999	2000	2001	2002
Liquidated curatorship	1	1	0	1	2	1	0	1	1
Deregistrations, takeovers, acquisitions, etc.	1	2	4	6	4	1	7	9	14
Total	2	3	4	7	6	2	7	10	15
Source: SARB (various years).

An alternative measure of stability is the public perception of banks. This is an important aspect, given that the monetary system is underpinned by public confidence. Public perception can be measured qualitatively in people's attitude to banks, as well as quantitatively through fluctuations of deposits before, during and after crisis periods. The latter may not always be a good indicator – unless there is widespread loss of confidence in the banking sector, as occurred in Argentina in December 2001, depositors may merely shift their funds to more stable banks. Some of the bigger banks in South Africa have indicated that their client base has grown as a direct consequence of the problems associated with A2 banks in 2002.

Table 7 shows the perceptions of South Africans towards banks after the Saambou crisis. The data suggest that regardless of whether or not the respondents use the banking system, they perceive it to be relatively crime‐free. However, banks are not always seen as a safe place to keep money. The majority of respondents nonetheless seem to regard banks as sound, relative to other alternatives.

Consumer perceptions regarding the advantages of banks

Perceived advantages of banking money
	% of respondents agreeing
	Fully banked^1	Partially banked	Unbanked
‘In a bank, my money cannot be stolen’	84%	85%	83%
‘Banks are not always a safe place’	42%	45%	44%
Note: ^1Implies that the respondent has access to some high‐level product such as a credit card or a current account with an overdraft. Source: Finmark Trust (2003a).

Bank regulation has traditionally focused on the supervision of individual banks through measures such as the assessment of credit risk and capital requirements. This approach has been termed ‘micro‐prudential’ (Borio, 2003), with the focus on protection of deposits. However, another source of bank crisis is the common exposure to macroeconomic risk factors across institutions. The Asian crisis in 1997, for example, gave impetus to the establishment of the South African Financial Stability Unit of the Reserve Bank.

In conclusion, good macroeconomic performance requires a balance between stability and new development. There is evidence that this balance has been achieved in the South African banking system. The growth of the financial industries and the adoption of new technology suggest that there is impetus for new development in the sector. In terms of stability, while there have been bank failures over the past decade, these do not appear to have undermined public confidence.

4 MICROECONOMIC PERFORMANCE

Good performance at the microeconomic level of the banking system can be seen as a balance between the cost of providing financial services and the ability to allocate resources in a socially acceptable way.

4.1 Cost of provision

Efficient provision of financial services and products, as in other industries, is assumed to ensure that consumers pay fair prices for products and that scarce resources are allocated to their highest value uses (Wallis Report, 1997: 601). A full evaluation of the notion of fair pricing and reasonable costing in the industry requires detailed pricing and costing information, which falls outside the scope of this project.

In the banking industry, technical efficiency is often measured by expressing operating expenses as a percentage of total income, under the assumption that efficient delivery is associated with keeping costs below a certain proportion of income. The current international benchmark of 60 per cent implies that banks with a ratio of over 60 are considered inefficient. Average cost‐to‐income ratios for 2001 in Brazil (66,6 per cent), Italy (62 per cent) and France (61 per cent) are moderately above the international benchmark. While South African banks have managed to keep this ratio below the international benchmark in the past, in recent years the ratio has risen (Figure 9). Increasing consolidation, together with changes in regulated accounting and compliance practices, appears to have stimulated costs in the industry. Since 2000, operating expenses have outgrown industry income. For example, while total income grew by over 5 per cent in 2002, expenses grew by 9,6 per cent. While expenses for branches are on a declining trend (associated with branch closure) and employment is down, staff costs continue to rise (Banking Supervision, 2002:50). The data suggest that there is room for the South African industry to become more efficient.

Cost‐to‐income ratios of the banking sector

Local banks argue that the diversity of their client base increases their cost relative to those of banks in other countries. For example, ABSA (2002), which has long had the highest cost‐to‐income ratio of the four largest banks, has 2,3 million Flexibank clients, out of a base of 5,9 million. These Flexibank clients are more likely to use branch services than relatively low‐cost technology such as Internet banking. This, ABSA maintains, increases its costs.

While the use of a cost‐to‐income measure is appealing, it is not a perfect measure. Where institutions have significant market power, for example, they may be able to increase income at a faster rate than costs. Hence an improvement in the ratio may mean a worse, rather than a better deal for consumers. Towards the end of 2002, there was a strong increase in the bank interest margin (to 3,8 per cent from an average of 3,2 per cent during the year), which may reflect market power to extract a higher margin (Bank Supervision, 2002:13).

Evaluation of whether or not consumers are getting a fair deal is very difficult in an environment where cost data are withheld and there is no requirement for standardised disclosure of prices. In South Africa banks tend to compete on advertised interest rates, but do not consistently reveal all the fees and charges that may be attracted by a transaction. Recent research commissioned by the Micro Finance Regulatory Council (MFRC) revealed that canvassed bank clientele were surprised by fee charges (MFRC, 2003).

While costs are seen as strategic and are disclosed only reluctantly, the increase in non‐interest income (and hence fee income) to around 50 per cent of banks' income in South Africa suggests that standardised disclosure of fees would be a first step in enabling customers to assess whether they are paying fair prices for financial services.

4.2 Influence on economic activity

An appropriate measure for the financial sector's contribution to economic growth would be the ease with which companies can access financial institutions and the ease with which investors can get an adequate return (Rajan & Zingales, 2000). Unfortunately, the world over, these numbers are not easy to compute. In Section 3.1, data on certain growth indicators showed that in most of the years under review, loans and advances, insurance sales and market capitalisation on the stock exchange outgrew nominal GDP. While this suggests that the financial sector may not be constraining growth, it does not reveal the extent to which growth in particular market segments could be further encouraged.

Given that large companies often have their own treasury departments and are listed on an exchange, access to finance at reasonable terms is less likely to be a constraint. Much of the discussion here has focused on small and medium firms, which are important generators of wealth and employment. In South Africa, the debate on the provision of finance from banks and other institutions versus funding from investors is ongoing. While there is some evidence that access to finance is a problem, it is also clear that other obstacles can complicate financial relationships. There is no current requirement on banks or other providers to report the rejection rates or reasons for rejection. Such statistics would, in any case, probably be skewed as a significant proportion of would‐be applicants simply never approach banks for fear of being turned away.

In the Global Entrepreneurship Monitor (2002), a survey of South African disadvantaged entrepreneurs in urban areas revealed that entrepreneurs are likely to be more successful when applying for credit card or overdraft finance (which attracts higher charges) than for a bank loan (Table 8). Some 33 per cent of the sample received offers of some form of finance, the majority of which was bank finance. None received venture capital and only a small fraction received finance from informal commercial sources. While the study did not look at loans from friends and family (which are known to be an important source of finance in microbusinesses), the survey suggests that there are few non‐bank commercial alternatives. The survey confirms the prevalence of credit rationing in this market segment.

Applications for finance by entrepreneurs

% of entrepreneurs	Applying for finance	Successful applications	Accepted offer of finance	% of total sample that received Finance
Bank loan	84,4	25,0	85,2	18,0
Bank overdraft	18,8	62,5	76,7	9,0
Bank credit card	2,3	83,3	60,0	1,2
Microlender	3,1	0	–	0
Stokvel	1,2	33,3	100,0	0,4
Mortgage	0,8	100,0	100,0	0,8
Venture capital	0,4	0	–	0
Average	–	33,2	82,4	27,3
Source: Global Entrepreneurship Monitor (2002).

Three‐quarters of all applicants indicated that they experienced one or more of the following problems at the time of applying for finance:

1.	Blacklisted with one of the credit bureaus
2.	Did not keep adequate financial records
3.	Lacked collateral
4.	Sought working capital

These factors place entrepreneurs in a high‐risk category. Given these obstacles to finance, the blame for lack of access to finance cannot be placed squarely at the door of financial institutions. It is when entrepreneurs have none of these problems and are still denied finance that the ability of financial providers to distribute resources in a socially desirable way becomes questionable.

The stimulation of venture capital has been discussed in financial circles for some time. In June 2003, an Alternate Exchange (Alt‐X) aimed at small and medium‐sized firms was launched. The new exchange replaced the previously unsuccessful venture capital markets and development capital markets. This approach has been relatively successful in the United Kingdom but not in Germany, where the dual system has deterred rather than encouraged investors (Business Day, 2003a). The success of the Alt‐X needs to be judged not so much by its market capitalisation, but rather from the values of shares traded and the number of new issues. This would give a sense of the equity raised rather than merely the equity listed.

4.3 Provision of financial services

In some quarters, provision of financial services is conflated with access to credit. However, financial services embrace transactions facilities, saving services and insurance services, as well as provision of credit. Historically, data on these services have not been rigorously collected in South Africa, with the best data emanating from the South African Advertising Research Foundation (SAARF, 2000), as an outcome of its annual media products survey. It found that over the period 1995–9 only 40 per cent of people surveyed had a savings account. Even fewer respondents had access to a current account or credit card. As respondents are likely to understate the extent to which they are indebted, access to loans in Table 9 appears to be low.

Percentage of population with access to financial services

All LSM groups	ATM card	Cheque account	Credit card	Loan	Savings account
1995	22,8%	9,1%	5,3%	3,2%	38,2%
1996	24,9%	9,6%	5,5%	3,2%	37,7%
1997	25,7%	9,4%	5,3%	2,3%	35,8%
1998	25,5%	9,0%	5,1%	3,0%	38,5%
1999	31,8%	8,9%	5,2%	3,0%	37,0%
Average	26,1%	9,2%	5,3%	2,9%	37,4%
Note: LSM = Living Standard Measure. Source: SAARF (2000).

Recent efforts to improve the quality of information have resulted in the Finscope data sponsored by the Finmark Trust (2003a). The Finscope data estimate that 38 per cent of South African adults have access to insurance services of some sort (including burial societies); 40 per cent have access to transactions facilities; 44 per cent to some savings facilities, including informal savings associations; and 57 per cent are credit active.

These data suggest that while the situation is not as bleak as implied by the SAARF there is considerable room for improvement, with roughly 60 per cent of the population excluded from formal financial provision. The Finscope survey revealed that up to 25 per cent of the unbanked have indirect access to financial services through a family member.

The data in Table 10 show that only a minority of South Africans have access to high‐level financial products. A recent study for the MFRC into the costs, volume and allocation of consumer credit (FEASibility, 2003a) revealed that the market is segmented into roughly four categories:

1.	Prime clients (served at the prime rate of interest or less)
2.	Clients who can be served under the usury cap rate (prime+one‐third of prime plus 6 per cent)
3.	Clients who can be served under the Exemption Notice to the Usury Act (up to R10 000 over 36 months)
4.	Clients whose personal circumstances dictate that they are excluded from provision

Access to financial services, 2001/2

	Fully banked	Partially banked	Unbanked
Definition	Access to high‐end products	Access to saving accounts, burial society, etc.	No accounts
Number of adults	2,6 million	4,5 million	4,5 million
Percentage of population	22%	37%	37%^1
Note: 14 per cent not categorised. Source: Finmark Trust (2003a).

Those who have mortgageable property are able to leverage access to credit at the lowest cost. Those without security or regular formal income pay the most for credit.

The outreach of the four largest South African banks to previously excluded consumers has not always been successful. A detailed account of their attempts to provide for the excluded has been dealt with elsewhere (Hawkins, 2002) – suffice to note that most such attempts have been supply driven. This has not always met the needs of the consumer, as is evidenced by the 14 per cent of the unbanked category who reported that they used to have a bank account but have since closed it.

Access to saving services appears to have been particularly neglected. Rutherford (2000) has documented the need in poorer households for access to a facility that provides an easily accessible store for saving. In South Africa, access to savings accounts held in banks may be costly, with fees accruing for both deposits and withdrawals. Where small amounts are saved regularly, these fees can erode not only the modest interest earned, but the capital as well (FEAsibility, 2003a).

Recent discussion around the Financial Charter suggests that targets to improve financial provision may need to be put in place. Along these lines, Post Bank's plan to install 3 000 ATMs is an ambitious project that could go a long way to improve delivery to the roughly two‐thirds of adults who do not have access to a savings account. Should this be successful, it would increase the estimated number of ATMs from 6 500 to 9 500 (Business Day, 2003b).

Lack of provision by banks to low‐income consumers arises partially from regulatory inflexibility. This inflexibility has created significant barriers to entry and high licensing fees, which may mean that this segment of the population cannot be serviced on a sustainable basis. The proposals on second‐ and third‐tier banking, currently being considered for legislation, may change this as these entities will have lower licensing fees and operating costs. It is feasible, for example, that a retail food chain may register to conduct low‐income banking using its existing infrastructure.

While the discussion has focused primarily on the banking industry, problems of provision also occur in the insurance industry. The high levels of surrenders and lapses in the life insurance industry did not taper off over the period under review (Table 11), and were considered to be of concern (FSB, 1996). The following reasons were put forward for these high levels: depressed economic conditions, increasing competition from non‐insurance investment institutions, and failure to inform customers adequately regarding the nature of the product.

Surrenders and lapses of insurance life policies¹

%	1993	1994	1995	1996	1997	1998	1999	2000	2001	Average
Surrenders
Number of policies	16,7	17,6	16,8	19	26,9	25,1	25,2	16,4	24,9	21,0
Annual premiums	9,7	11,8	12	15,2	16,6	17,2	24,3	21,5	24,8	17,0
Lapses
Number of policies	29,3	28,63	25,9	25,5	31,6	30,9	28,8	16,9	29,3	27,4
Annual premiums	16,9	16,3	16,3	19,6	23,6	22,6	25,3	21,3	22,3	20,5
Note: ^1Excludes pension fund and group life business. Source: FSB (2002).

We close this section with two conclusions:

1.

The evaluation of microeconomic performance presented here examines cost efficiencies and provision of services to small businesses and consumers. The evaluation was constrained due to lack of series data over the period. The evidence suggests that the microeconomic performance in terms of cost efficiencies and allocation of resources of the financial sector leaves something to be desired, with little measurable improvement in either area over the decade.

2.

The cost‐to‐income ratios of South African banks have recently increased due to costs associated with mergers and changes in regulatory and compliance practices, but are not out of line with overseas ratios. While banks do appear to ration credit to small businesses, in many cases this may be due to legitimate obstacles to assessing creditworthiness. The current level of underprovision of financial services to the majority of South Africans is unsustainable and appears to be receiving belated attention. The changes in licensing requirements for smaller banks, which may bring with them renewed contestability in certain market segments, may be a first step to improving provision.

5 EVALUATION OF PERFORMANCE

As with any evaluation of a sector that enjoys such extensive influence in an economy, it is difficult to provide an unequivocal evaluation of its performance over the period of a decade. A short analysis provides a selective rather than a comprehensive overview. The discussion has pointed to areas of good performance, such as growth in loans and advances and the stability of the system at a time when South Asian and South American countries experienced significant bank failure and crisis. The sector also innovates predominantly for the high‐end market segment.

However, there are areas where the performance of the financial sector was found wanting. While the roll‐out of non‐financial services has improved since 1994, there is little to suggest that the number of consumers being helped has increased much. Levels of lapses and surrenders of insurance policies continue to show that at least one out of every five polices sold will be surrendered over the course of a year, and one will lapse. Some 14 per cent of those clients who previously had bank accounts have closed them. Although the absence of good trend data is a problem, existing evidence points to a sector that has been slow to change its focus to the consumer‐based development of products. This is particularly so in the case of meeting the needs of middle‐ and low‐income consumers and smaller businesses.

The picture painted here has much to do with the regulatory regime. In 1994, when foreign bank ownership was permitted, it was restricted to the individual high net worth and corporate market segments, due to the stipulation that clients with foreign institutions were required to maintain a minimum deposit of R1 million. While there is no way of telling whether foreign entities would have entered the retail market if there had been no such constraint, the outcome has been considerable contestability at the high end of the market and little elsewhere. To some extent, this competition at the high end could be said to have further polarised the provision of financial services, with increasing attention given by the incumbents to retain corporate and niche accounts at the cost of neglecting the universal provision of services. This scramble for the high‐end market segments has undermined perceptions of the possible commercial returns from the provision of retail services. For example, in the PriceWaterhouseCoopers (2003: 5, 32) banking survey where 22 banks are interviewed, only five banks were involved in retail banking. Four of these banks rated retail banking as very or extremely profitable. However, as the vast majority of the banks did not provide retail services, retail banking was not listed as a profitable activity under the main findings. The recent announcement that Barclays and Standard Chartered are re‐entering the banking market is encouraging, even though their entry is pitched at niche retail level – Barclays at the lucrative credit card market and Standard Chartered at Internet banking.

Much of the failure to deliver services to the mass market has to do with the absolute nature of the banking licence, which has one set of standards. The Mutual Banks Act has failed to facilitate institutions with a greater community flavour. Community banks, which operate under an exemption to the Banks Act, account for a fraction of the banking system's deposits.

Pending legislation will allow the licensing of second‐ and third‐tier banks. It is currently proposed that the third‐tier banks will be ‘narrow’ or savings banks, while the second‐tier banks will also be able to offer loans based on collateral. These institutions will not be allowed to offer cheque accounts and will only be able to access the National Payment System through a sponsor. These banks will be constrained as to how they could leverage their deposits, but will conceivably provide a range of financial services to a far broader range of society. For example, if some small range of products (such as savings, transaction and funeral policy services) could be provided from retail stores, the number of possible financial services outlets grows from 2 700 bank branches and 6 300 ATMs to over 100 000 outlets (Finmark Trust, 2003b). This may do much to stimulate the industry to provide services to the majority of South Africans.

One of the constraints on banking the unbanked is the Financial Intelligence Centre Act, which requires that bankers know their clients, in a bid to avoid money laundering. To the extent that the unbanked do not have fixed addresses, this may exclude them from access to the banking system. Only those with deposits of less than R5 000,00 are exempt from this requirement. It may be that formal microlenders who know how to contact their clients have a role to play here.

6 CONCLUSION

The financial sector is a vital service sector in the South African economy, in terms of size and growth. However, it is not in itself a generator of increased employment. It does have the capacity to encourage employment in other sectors, to the extent that it influences economic growth positively. The capacity of the banking and insurance industries and securities market to provide finance and funding for businesses exists. The question is whether or not this capacity is being leveraged in a socially acceptable way. Banks are conscious of the need to generate profits for their shareholders and of the need to maintain a sophisticated, world‐class appearance. This sometimes appears to be at odds with the desire of small entrepreneurs to expand their businesses through banking finance, for example. While the debate of whether banks provide sufficient finance for small businesses is ongoing, it is apparent that there are obstacles to assessment of creditworthiness, which need to be addressed.

As to the provision of services for the majority of South Africans, there now appears to be widespread acceptance that more must be done. It is in this arena that regulation will prove to be crucial, even given favourable technology and a buoyant economy. Without a true commitment to improve contestability at the low end of the market (which will involve providing new entrants better access to the payments system), provision of services to the low end of the market is likely to be ghettoised. It is not sufficient to have improvement in ownership of equity in this sector. Improved access to the means by which South Africans can manage their present and future is the key to a better distribution of the fruits of economic growth. In a world of many pressures – including greater corporate and social governance requirements, better disclosure and more foreign competition – this remains a crucial and outstanding challenge to the sector.

Additional people interviewed

BLACKBEARD, M, 2003. Advocate, South African Reserve Bank, Pretoria.

DELPORT, J, 2003. Assistant General Manager, South African Reserve Bank, Pretoria.

LUUS, C, 2003. Chief Economist, ABSA, Johannesburg.

MACKINNON, N, 2003. Senior Analyst, South African Reserve Bank, Pretoria.

SMAL, D, 2003. Assistant General Manager, South African Reserve Bank, Pretoria.

STEYN, S, 2003. Business Consultant, ABSA, Johannesburg.

VAN STADEN, D, 2003. Head: Registration and Policy Department, Financial Services Board, Pretoria.

VORSTER, S, 2003. Consultant: Product Advice, Sanlam, Cape Town.

Notes

Sources: SARB (various years); JSE Securities Exchange SA (various years).

Sources: DI 900 surveys (Banking Supervision, various years); Banking Council (1999).